Judge To Detroit: Renegotiate Debt Deal

By Johanna Bennett

The federal court judge handling Detroit’s municipal bankruptcy wants the Motor City to make a deal. On Wednesday, Judge Steven Rhodes abruptly suspended hearings underway regarding the city’s efforts to restructure about $300 million in secured debt and urged officials to renegotiate better terms with its original lenders, Bank of America (BAC) and UBS (UBS).

According to The Wall Street Journal, Judge Rhodes raised questions during a three-day hearing about whether the deal in question—paying about 75 cents on the dollar to a secured creditor — was a good one for the city. Rhodes also questioned whether Detroit Emergency Manager Kevyn Orr should have challenged the legality of the original debt deal to fund city pensions and the swap agreements that followed to prevent a default on the debt.

The WSJ noted:

If the deal goes south, it could be a blow to efforts by the city’s powerful emergency manager to steer the city of 700,000 with an estimated $18 billion in debt through bankruptcy quickly. The deal is the only one on the table with any of the city’s thousands of secured and unsecured creditors. It was expected to be a key part of the city’s proposed plan to restructure its overall debt, slated to be completed in early January.

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There are 2 comments

DECEMBER 19, 2013 10:33 P.M.

kDavis wrote:

Now that's interesting - I didn't know a judge could (or would) intervene in that manner.

DECEMBER 20, 2013 12:35 A.M.

John mckenna wrote:

Whether the judge is in the pocket of the democrat central committee or not, you can't keep wittling down the real debt, without further destroying the liquidity of the actual claimants, many who are suffering severe harm because of criminal malfeasance by democrat governors, mayors and other felons, who stuffed money in their pockets while destroying the city, its people, its children, and its future. By the way putting $80 million dollars into the general fund is not enough to do anything.